Inflation took a step farther from the Central Bank’s target in June, rising for the fourth straight month to 9.4% on the back of higher year-on-year changes in food and non-alcoholic-beverage prices. The rate increased from 9.3% in May, according to the Ghana Statistical Service (GSS) on Wednesday, whose data showed food and non-alcoholic beverage inflation gaining from 5% in May to 5.4% in June. Non-food inflation stabilised at 11.9%, the data showed. The Bank of Ghana (BoG) is targetting an inflation rate of 8.5% at the end of 2012 and an annual average of 8.7%, but heightened volatility in the cedi has driven price pressures since March this year. The local currency has so far lost more than 18% against the dollar, the major importing currency, as imports into the country have skyrocketed due to fast-paced economic growth and excess liquidity. The BoG has raised its benchmark lending rate by a cumulative 250 basis points this year to 15% to prop-up the cedi, but its last squeeze in June was more lenient as the Bank said past measures, including a boost to yields on T-bills and changes to bank reserve rules, were beginning to achieve results. The interest rate on the 91-day bill which measures the government’s three-month borrowing costs has soared to 22.6% this week from 10.7% in January, and some have begun to worry that the cost of supporting the cedi has become unbearable. “We have gone as far as monetary policy can go. What we have to realise is that the trade-off is between jobs and macro stability. We should worry about jobs, joblessness and poverty,” said Dr. Joe Abbey, Executive Director of the Centre for Policy Analysis, in an interview on June 12. Further interest-rate hikes, he said, will lead banks to cut back lending to the private sector as they invest their funds in government paper. “We’re not going to get the jobs unless SMEs can access credit. “This whole crisis is a fiscal-policy crisis. There is a market fear that we will, as usual, overspend in the election year and that the cedi will lose value,” he said, referring to the underlying cause of foreign-exchange pressure. The government is targetting a budget deficit of 4.8% of GDP in 2012 but most market analysts have forecast the gap to be wider, fearing a repeat of spending excesses that have become a common feature of election years. Price pressures to abate: The GSS said inflation is likely to peak in July and fall afterwards as the three-month (August-October) harvest season approaches, a trend that has repeated itself in previous years. “The trend does not change. If the rain distribution is adequate and the harvest is good, I don’t expect anything different,” said Kofi Agyemang-Duah, Deputy Government Statistician at a briefing in Accra. He said the monthly change in prices slackened in June to 1.4% from 2% between April and May. But Databank has said price pressures will return in the second half of the year, forecasting headline inflation to average between 10 and 12% in the period. “Single-digit inflation was always going to be a challenge for the Ghanaian economy in 2012. Historically, government expenditure patterns and currency weakness have severely impacted pricing trends in election years,” Head of Research for the investment bank, Nii Ampa-Sowa, said on May 10.